Overstock.com 2010 Annual Report Download - page 124

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Table of Contents
Overstock.com, Inc.
Notes to Consolidated Financial Statements (Continued)
14. COMMITMENTS AND CONTINGENCIES (Continued)
system and method for communicating between local subscriber units and a local base station repeater cell in a two-way communication interactive video
network. The complaint alleges that we participate in joint infringement, contribute to infringement or induce others to infringe the patent because we sell
mobile devices which devices are enabled with infringing components or which perform processes which infringe the patent. We believe that if called upon to
defend the action, certain third party vendors of such devices sold to us are contractually obligated to indemnify us in this action. We have answered the
complaint. The case is in its early stages. The nature of the loss contingencies relating to claims that have been asserted against us are described above.
However, no estimate of the loss or range of loss can be made. We intend to vigorously defend this action and pursue our indemnification rights with our
vendors.
On September 10, 2010 Guildersleeve Holdings AG, LLC filed suit against us and 19 other defendants in the United States District Court in the Central
District of California for infringement of a patent covering a system and method for updating "a database of metadata defining a predetermined plurality of
viewer states in the manner claimed" in the patent suit. We resolved this matter by acquiring a license for a nominal payment and the case has been dismissed.
On September 29, 2010, a trustee in bankruptcy filed against us an adversary proceeding in the matter of In re: Petters Company, Inc., a case filed in
United States Bankruptcy Court, in the District of Minnesota. The complaint alleges principal causes of action against us under various Bankruptcy Code
sections and the Minnesota Fraudulent Transfer Act, to recover damages for alleged transfers of property from the Petters Company occurring prior to the
filing of the case initially as a civil receivership in October 2008. The trustee's complaint alleges such transfers occurred in at least one note transaction
whereby we transferred at least $2,300,000 and received in return transfers totaling at least $2,547,406. The trustee does not specify a date for the
transactions; however we believe that any alleged transaction with the Petters Company would have taken place in excess of seven years from the date of the
filing of the adversary proceeding. The case is in its early stages. The nature of the loss contingencies relating to claims that have been asserted against us are
described above. However, no estimate of the loss or range of loss can be made. We intend to vigorously defend this action.
We have received a notice from the Securities and Exchange Commission ("SEC") stating that the SEC is conducting an investigation concerning our
previously-announced financial restatements of 2006 and 2008 and other matters. The subpoena accompanying the notice covers documents related to the
restatements and also to our billings to our partners in the fourth quarter of 2008 and related collections, and our accounting for and implementation of
software relating to our accounting for customer refunds and credits, including offsets to partners, and related matters. We have been and will continue to
cooperate fully with the investigation.
We establish liabilities when a particular contingency is probable and estimable. We believe the $1.3 million accrued at December 31, 2010 in our
consolidated financial statements is adequate in light of the probable and estimable liabilities. It is reasonably possible that the potential losses may exceed our
accrued liabilities.
We have other contingencies which are reasonably possible; however, the reasonably possible exposure to losses cannot currently be estimated.
We recognized a reduction in legal expenses of $4.5 million and $7.1 million during the years ended December 31, 2010 and 2009, respectively, related
to the settlement of legal matters.
F-35